Pason Reports Fourth Quarter and Year End 2013 Results

CALGARY, Feb. 27, 2014 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 
2013 fourth quarter and year end results. 
Performance Data 


                  Three Months Ended December   
                              31,                    Years Ended December 31,
                
                     2013       2012    Change      2013      2012    Change
    (CDN 000s,                                                      
    except per
    share data)       ($)        ($)       (%)       ($)       ($)       (%)
    Revenue       108,947     94,006        16   403,088   386,514         4
    Income                                                          
    (loss)         24,288   (13,703)   —    23,655    39,884      (41)
      Per share      0.30              —      0.29      0.49      (41)
      - basic                 (0.17)                                
      Per share      0.29              —      0.29      0.48      (40)
      - diluted               (0.16)                                
    EBITDA (1)     55,231      8,286       567   136,647   151,753      (10)
      As a % of      50.7                  475      33.9      39.3      (14)
      revenue                    8.8                                
      Per share      0.67                  566      1.66      1.85      (10)
      - basic                   0.10                                
      Per share      0.66                  565      1.66      1.84       (9)
      - diluted                 0.10                                
    Funds flow                                                      
    from
    operations     44,981     36,948        22   123,075   158,948      (23)
      Per share      0.55                   22      1.50      1.94      (23)
      - basic                   0.45                                
      Per share      0.54                   21      1.49      1.92      (23)
      - diluted                 0.44                                
    Cash (used                                                      
    in) from
    operating
    activities   (75,220)     34,215   —    62,047   169,178      (63)
      Per share    (0.92)              —      0.76      2.06      (63)
      - basic                   0.42                                
      Per share    (0.90)              —      0.75      2.05      (63)
      - diluted                 0.41                                
    Free cash                                                       
    flow (1)     (95,347)     20,199   —   (8,617)    97,754   —
      Per share    (1.16)              —    (0.10)      1.19   —
      - basic                   0.25                                
      Per share    (1.15)              —    (0.10)      1.18   —
      - diluted                 0.24                                
    Capital                                                         
    expenditures   20,127     14,016        44    70,664    71,424       (1)
    Working                                                         
    capital       127,933    163,371      (22)   127,933   163,371      (22)
    Total Assets  445,876    488,378       (9)   445,876   488,378       (9)
    Total                                                           
    long-term
    debt          —    —   —   —   —   —
    Cash                                                            
    dividends
    declared (2)     0.14       0.24      (42)      0.53      0.46        15
    Shares                                                          
    outstanding
    end of
    period (#)     82,158     82,049   —    82,158    82,049   —
    (1)  These Non-IFRS financial measures are defined in the Management's
         Discussion and Analysis section.
    (2)  The Company changed its dividend policy whereby, effective for
         2013, the Company adopted a quarterly dividend to replace the
         semi-annual dividend. The $0.24 dividend declared in the fourth
         quarter of 2012 represents the second semi-annual dividend of
         2012.

President's Message

Pason demonstrated robust operational performance during the fourth quarter, 
despite continued declines in drilling activity in the United States. Drilling 
industry days in the United States were 4% lower in the fourth quarter of 2013 
than in the fourth quarter of the previous year. In Canada, drilling days were 
up 5% for the period. As in previous periods, activity in international 
markets was higher than a year ago, but the picture beyond North America 
continued to vary widely between regions and countries.

Total revenue increased 16% to $108.9 million, a record for the fourth 
quarter. All of Pason's major product categories generated revenue growth 
above drilling industry activity, with the exception of the Hazardous Gas 
Alarm. The major segments which demonstrated the highest year-over-year growth 
rate were Communications at 61% followed by Gas Analyzer at 24%.

EBITDA for the fourth quarter was $55.2 million or 51% of revenue, while funds 
flow from operations was $45.0 million, up 22% from the fourth quarter of 2012.

The Company recorded a net income of $24.3 million, or $0.30 per share, 
compared to a net loss of $13.7 million, or $0.17 per share, in the fourth 
quarter of 2012. The net loss in the previous year was due to an accrual of 
$32.5 million for the liability related to the patent litigation, a non-cash 
impairment loss of $4.7 million against its Torque and Tension Sub product, 
and an additional $0.6 million against the US water treatment business.

Capital expenditures for the fourth quarter were $20.1 million, up from $14.0 
million the previous year, as deployment of new hardware, including Pason Rig 
Display and components of the EDR evolution, ramped up.

On December 31, 2013, our cash position stood at $89.5 million, which includes 
$11.5 million cash held in trust for the January 2014 payment of the dividend 
declared in the fourth quarter of 2013. The payment of USD$112.0 million, 
announced on August 2, required to resolve all claims against Pason regarding 
the infringement lawsuits relating to our AutoDriller, was made on November 
12, 2013. There is no debt on the balance sheet.

The results for the full year 2013 include record revenue of $403.1 million, 
EBITDA of $136.7 million and a net income of $23.7 million. EBITDA and net 
income for the year were affected by a number of one-time items, most notably 
the resolution of the infringement lawsuits relating to our AutoDriller.

We are increasing our quarterly dividend by 7% to $0.15 per share.

United States

The US segment, our largest business unit, includes our US rental business and 
3PS Inc., our Austin-based equipment manufacturer.

The downward trend in United States drilling activity slowed down. The number 
of industry days in the fourth quarter of 2013 was essentially unchanged from 
the third quarter of 2013. Year-over-year, industry days were down 4% in the 
fourth quarter of 2013 compared to fourth quarter of 2012, while revenue 
increased 18% to $61.3 million. On average, 961 US land rigs were operating 
Pason equipment during the fourth quarter of 2013, compared to 936 in the same 
period of 2012. Revenue growth above industry day growth was achieved through 
an increase in market share, higher product penetration and a change to the 
Communications pricing model.

Average daily revenue per rig increased by 6%, from US$574 in the fourth 
quarter of 2012 to US$611 in 2013. Communications and Gas Analyzer showed 
above average growth rates during the period. EDR market share for the fourth 
quarter of 2013 was 57% essentially unchanged from the previous quarter and up 
3% from the same period in 2012.

Operating costs in the US segment increased by 7% due to the purchase of 
additional satellite bandwidth (which is treated as an operating expense), and 
depreciation and amortization increased by 3%. As a result, our US business 
unit was able to generate an operating profit of $30.9 million in the fourth 
quarter, an increase of 33% over 2012.

Canada

Drilling activity in Canada was slightly higher in the fourth quarter of 2013 
than in the previous year, with industry days up 5%. EDR market share in the 
fourth quarter of 2013 was 94% compared to 92% the previous year and 93% the 
previous quarter. Revenue for the fourth quarter increased 9% to $34.9 
million. On average, 333 Canadian land rigs were operating Pason equipment 
compared to 308 the year before.

Average daily revenue per rig increased by 0.4% from $1,116 in the fourth 
quarter of 2012 to $1,121 in 2013. EDR (including Workstations and Sidekicks), 
Software, and Gas Analyzer showed above average growth rates during the period.

Operating costs increased by 15% due to the purchase of additional satellite 
bandwidth, and depreciation and amortization increased by 24%. The increase in 
depreciation and amortization was primarily due to the Company recording a 
non-cash write-off of $1.1 million in previously capitalized R&D costs because 
we discontinued funding certain projects. As a result, our Canadian business 
unit was able to generate an operating profit of $16.9 million for the fourth 
quarter of 2013, unchanged from the same period in 2012.

International

Our International business unit, which includes our businesses in Latin 
America, Australia, and offshore & frontier regions, had a good quarter. 
Revenue increased by 29% to $12.8 million for the fourth quarter of 2013 
compared to the fourth quarter of 2012. Revenue was up 11% from the previous 
quarter.

Strong revenue growth in Australia, Argentina and Offshore & Frontier was 
partially offset by continued industry weakness in Brazil and Mexico.

Operating costs increased 9% and depreciation and amortization decreased 39%. 
The increase in operating costs was again driven by higher importation costs 
as we delivered additional equipment to certain markets. As a result, the 
International business unit was able to generate a quarterly operating profit 
of $4.6 million, an increase of 257% over the previous year and up 84% from 
the previous quarter.

The international business unit generated 12% of total revenue and 9% of 
operating profit for the Company in the quarter.

Outlook

Analyst's outlooks for drilling industry activity in North America are flat to 
modestly positive for 2014, with a  potential activity increase towards the 
end of the year and into 2015 driven by LNG-related gas drilling activity.

We anticipate that some of the new products and product enhancements, both on 
the hardware and software sides, will start gaining traction in the North 
American market in 2014. For example, the new Pason Rig Display (a ruggedized 
19 inch touch screen computer) is already deployed on over 300 drilling rigs 
in the United States and Canada. We also expect continued growth in the 
Offshore & Frontier segment where Pason equipment is already active on over 50 
drilling rigs. And we plan to roll out some products and services that have 
been developed in collaboration with third parties.

We plan for an increase in our R&D, IT and Corporate Services cost as we make 
important investments in our technical infrastructure and systems, as well as 
in our business development capabilities.

Our capital expenditure budget for the next 12 months is up to $96.1 million, 
$64.3 million of which is directed towards new hardware that can generate 
incremental revenue or save operating costs, $17.2 million for maintenance 
capital, and $14.6 million for capitalized R&D.

Our cash-generating capacity and our cash position are more than sufficient to 
cover new business development, planned equipment upgrades and the dividend.

(signed)

Marcel Kessler
President and Chief Executive Officer
February 27, 2014

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of 
February 27, 2014, and is a review of the financial condition and results of 
operations of Pason Systems Inc. (Pason or the Company) based on International 
Financial Reporting Standards (IFRS) and should be read in conjunction with 
the consolidated financial statements and accompanying notes.

Certain information regarding the Company contained herein may constitute 
forward-looking statements under applicable securities laws. Such statements 
are subject to known or unknown risks and uncertainties that may cause actual 
results to differ materially from those anticipated or implied in the 
forward-looking statements.

All financial measures presented in this report are expressed in Canadian 
dollars unless otherwise indicated.

Overview of the 2013 Fourth Quarter
                Three Months Ended December 31,    Years Ended December 31,
               
                    2013       2012      2011      2013      2012      2011
    (000s,                                                         
    except per
    share data)      ($)        ($)       ($)       ($)       ($)       ($)
    Revenue      108,947     94,006   100,933   403,088   386,514   346,158
    Income                                                         
    (loss)        24,288   (13,703)    31,702    23,655    39,884    86,223
      Per share     0.30     (0.17)      0.39      0.29      0.49      1.05
      - basic                                                      
      Per share     0.29     (0.16)      0.39      0.29      0.48      1.04
      - diluted                                                    
    EBITDA (1)    55,231      8,286    47,920   136,647   151,753   171,661
      As a % of     50.7        8.8      47.5      33.9      39.3      49.6
      revenue                                                      
      Per share     0.67       0.10      0.59      1.66      1.85      2.10
      - basic                                                      
      Per share     0.66       0.10      0.58      1.66      1.84      2.08
      - diluted                                                    
    Funds flow                                                     
    from
    operations    44,981     36,948    42,089   123,075   158,948   145,358
      Per share     0.55       0.45      0.51      1.50      1.94      1.78
      - basic                                                      
      Per share     0.54       0.44      0.51      1.49      1.92      1.76
      - diluted                                                    
    Cash (used                                                     
    in) from
    operating
    activities  (75,220)     34,215    36,451    62,047   169,178   126,329
      Per share   (0.92)       0.42      0.45      0.76      2.06      1.54
      - basic                                                      
      Per share   (0.90)       0.41      0.44      0.75      2.05      1.53
      - diluted                                                    
    Free cash                                                      
    flow (1)    (95,347)     20,199    14,340   (8,617)    97,754    47,788
      Per share   (1.16)       0.25      0.18    (0.10)      1.19      0.58
      - basic                                                      
      Per share   (1.15)       0.24      0.17    (0.10)      1.18      0.58
      - diluted                                                    
    Cash                                                           
    dividends
    declared
    (2)             0.14       0.24      0.20      0.53      0.46      0.38
    (1)  These Non-IFRS financial measures are defined in the Management's
         Discussion and Analysis section.
    (2)  The Company changed its dividend policy whereby, effective for
         2013, the Company adopted a quarterly dividend to replace the
         semi-annual dividend.
         The $0.24 dividend declared in the fourth quarter of 2012 and the
         $0.20 dividend declared in the fourth quarter of  2011 represents
         the second semi-annual dividend in the respective year.

Additional IFRS Measures

In its audited consolidated financial statements the Corporation uses certain 
additional IFRS measures. Management believes these measures provide useful 
supplemental information to readers.

Funds flow from operations

Management believes that funds flow from operations, as reported in the 
Consolidated Statements of Cash Flows, is a useful additional measure as it 
represents the cash generated during the period, regardless of the timing of 
collection of receivables and payment of payables. Funds flow from operations 
represents the cash flow from continuing operations, excluding non-cash items. 
Funds flow from operations is defined as net income adjusted for depreciation 
and amortization expense, non-cash stock-based compensation expense, deferred 
taxes, and other non-cash items impacting operations.

Cash from operating activities

Cash from operating activities is defined as funds flow from operations 
adjusted for changes in working capital items.

Funds flow from operations and cash from operating activities were impacted by 
the Company's accounting for the litigation provision. Before 2013, the 
Company recorded it as a non-cash add back to arrive at funds flow from 
operations. In 2013, the provision and settlement was treated as a change in 
working capital to calculate cash from operating activities.

Non-IFRS Financial Measures

These definitions are not recognized measures under IFRS, and accordingly, may 
not be comparable to measures used by other companies. These Non-IFRS measures 
provide readers with additional information regarding the Company's ability to 
generate funds to finance its operations, fund its research and development 
and capital expenditure program, and pay dividends.

EBITDA

EBITDA is defined as net income before interest expense, income taxes, 
stock-based compensation expense, and depreciation and amortization expense.

Free cash flow

Free cash flow is defined as cash from operating activities less capital 
expenditures and deferred development costs.

Overall Performance
                     Three Months Ended December
                                             31,  Years Ended December 31,
     
                        2013     2012   Change      2013      2012 Change
    (000s)               ($)      ($)      (%)       ($)       ($)    (%)
    Revenue                                                              
    Electronic                                                      
    Drilling
    Recorder (1)      46,551   40,601       15   175,120   168,951      4
      Pit Volume                                                    
      Totalizer       15,931   14,100       13    60,589    59,220      2
    Communications                                                  
    (1)                7,844    4,875       61    28,597    20,850     37
      Software         7,295    6,694        9    27,651    26,950      3
      AutoDriller      9,896    9,410        5    37,445    40,399    (7)
      Gas                                                           
      Analyzer/Total
      Gas System       8,585    6,898       24    31,501    27,304     15
      Hazardous Gas                                                 
      Alarm System     1,218    1,932     (37)     5,152     7,345   (30)
      Mobilization     2,897    3,098      (6)    11,292    12,265    (8)
    Sales (2)          4,870    2,949       65    13,195     9,575     38
      Other            3,860    3,449       12    12,546    13,655    (8)
    Total revenue    108,947   94,006       16   403,088   386,514      4
    (1)  A portion of the Company's USA communications revenue was
         reclassified to EDR revenue to better reflect the nature of such
         revenue. All comparative figures have been restated accordingly.
         This change had no impact on reported key metrics, EBITDA, cash
         flow from operating activities, or net income (Q4 2012 - $2,153,
         YTD 2012 - $9,344, YTD Q3 2013 - $6,711).
    (2)  Sales and rental services expense for 2012 have been reclassified
         to conform with 2013 presentation.

Electronic Drilling Recorder (EDR) and Pit Volume Totalizer (PVT) rental day 
performance for Canada and the United States is reported below:
                                                  Canada
               Three Months Ended December     Years Ended December 31,
                                       31,
                 2013     2012      Change      2013      2012   Change
                                       (%)                          (%)
    EDR rental 30,600   28,300           8   113,600   115,700      (2)
    days (#)
    PVT rental 29,700   27,900           6   111,100   114,200      (3)
    days (#)
                                                                       
                                             United States
               Three Months Ended December     Years Ended December 31,
                                       31,
                 2013     2012      Change      2013      2012   Change
                                       (%)                          (%)
    EDR rental 88,500   86,100           3   351,300   378,800      (7)
    days (#)
    PVT rental 66,700   62,100           7   263,700   267,800      (2)
    days (#)

Electronic Drilling Recorder

The Pason EDR remains the Company's primary product. The EDR provides a 
complete system of drilling data acquisition, data networking, and drilling 
management tools and reports at both the wellsite and customer offices. The 
EDR is the base product from which all other wellsite instrumentation products 
are linked. By linking these products, a number of otherwise redundant 
elements such as data processing, display, storage, and networking are 
eliminated. This ensures greater reliability and a more robust system of 
instrumentation for the customer. Revenue generated from the EDR increased 15% 
for the fourth quarter of 2013 compared to the same period in 2012 and on an 
annual basis revenue was up 4%. This increase is attributable to continued 
growth in demand for EDR peripheral devices in all of the Company's major 
markets, an increase in US market share over the fourth quarter of 2012 (57% 
versus 54%), a similar increase in the Canadian market share (94% versus 92%), 
a strengthening US dollar relative to the Canadian dollar, and new revenue in 
frontier markets. These factors were offset by a drop in rig activity in the 
US market (4% for the fourth quarter and 9% year to date) while fourth quarter 
Canadian rig activity was up 5% over 2012 levels, but decreased 4% on an 
annual basis. Canadian EDR days increased 8% in the three months ended 
December 31, 2013, while US EDR days increased by 3%. On an annual basis, EDR 
days dropped 2% in Canada and 7% in the US, both of which compared favorably 
to the decline in rig activity.

During the year ended December 31,2013, the Pason EDR was installed on 95% of 
all active land rigs in Canada and 57% of the land rigs in the US.

In addition, the Company continues to gain new customers in its International 
business unit.

Pit Volume Totalizer

The PVT is Pason's proprietary solution for the detection and early warning of 
"kicks" that are caused by hydrocarbons entering the wellbore under high 
pressure and expanding as they migrate to the surface. PVT revenue for the 
quarter was impacted by an increase in product penetration in the US market 
and the foreign exchange fluctuation, offset by the change in rig activity 
previously described above. During the year ended 2013, the PVT was installed 
on 98% of rigs with a Pason EDR in Canada and 75% in the US, compared to 99% 
and 71%, respectively, in 2012.

Communications

Pason's Communications rental revenue is derived from the Company's automatic 
aiming satellite system. This system provides high-speed wellsite 
communications for email and web application management tools. Pason displays 
all data in standard forms on its DataHub web application, although if 
customers require greater analysis or desire to have the information 
transferred to another supplier's database, data is available for export from 
the Pason DataHub using WITSML (a specification for transferring data among 
oilfield service companies, drilling contractors, and operators). The Company 
continues to complement its satellite equipment with High Speed Packet Access 
(HSPA), a high-speed wireless ground system that requires lower capital cost, 
less service, and lower cost per Internet kilobyte, benefiting Company 
margins. In Canada, HSPA has been installed on all rigs, and the majority of 
the rigs running will benefit from the investment in HSPA given the growth in 
cellular coverage. In the US, field coverage tests for HSPA are continuing 
with positive results. In addition, the US business unit increased its revenue 
as a result of a shift in the pricing model for communication services.

Software

The Pason DataHub is the Company's data management system that collects, 
stores, and displays drilling data, reports, and real-time information from 
drilling operations. The DataHub provides access to data through a number of 
innovative applications or services including:
        --  Live Rig View (LRV), which provides advanced data viewing,
            directional drilling, and 3D visualization of drilling data in
            real time via a web browser.
        --  Mobile Viewer, which allow users to access their data on mobile
            devices including iPhone, iPad, BlackBerry, and Android.
        --  WITSML, which provides seamless data sharing with third-party
            applications enhancing the value of data hosted by Pason.
        --  Additional specialized software, including remote directional.

During the year ended 2013, 97% of the Company's Canadian customers and 90% of 
customers in the US were using all or a portion of the functionality of the 
DataHub, compared to 98% and 87%, respectively, in 2012.

AutoDriller

Pason's AutoDriller is used to maintain constant weight on the drill bit while 
a well is being drilled. During the year ended December 31, 2013, the 
AutoDriller was installed on 73% of Canadian and 45% of US land rigs operating 
with a Pason EDR system, compared to 78% and 49%, respectively, in 2012. 
Pason's market share for this particular product has declined from previous 
levels due to the introduction and advancement of integrated drilling rigs.

Gas Analyzer and Total Gas System

The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the 
Canadian and US markets, measures the total hydrocarbon gases (C1 through C4) 
exiting the wellbore, and then calculates the lag time to show the formation 
depth where the gases were produced. The Gas Analyzer increases the 
functionality that was found in the TGAS product to include the actual 
composition of the gas and further calculates geologic ratios from the gas 
composition to assist in indicating the type of gas, natural gas liquid, or 
oil in the formation. The Company continues to realize increased product 
penetration for this product. For 2013, the Gas Analyzer was installed on 57% 
of Canadian and 23% of US land rigs operating with a Pason EDR system. The 
penetration in Canada is an increase of approximately 5% in market share over 
2012 levels while the US has seen an increase of 4%. The roll out of the Gas 
Analyzer in the International markets continues with anticipated completion in 
most of the major markets in 2014.

Hazardous Gas Alarm System

The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit 
(LEL) gases and H(2)S gases and displays the readings on the EDR. If a 
hazardous rig atmosphere is detected, the system reacts immediately, sounding 
an alarm and flashing a strobe light. Early in 2013, the Company identified a 
sensor on the H(2)S product, a part of the HGAS system, that was not 
performing to the manufacturer's standards. As a result, the Company suspended 
the functionality of this portion of the HGAS while it investigates a solution 
to the problem. The Company initiated field trials with a new technology in 
the third quarter of 2013 and while results showed improvements in performance 
the Company continues to research alternatives. The Company is still able to 
rent this equipment out in its International operations as the issues 
identified tend to be related to the operation of the sensors in cold climates.

Mobilization

Mobilization revenue is comprised of all services provided to our customers 
for which they are invoiced, and includes service calls, equipment 
installations, mileage, satellite transportation, and replacement parts.

Sales

Sales represent sensors and other systems sold by 3PS, Inc. and spare parts 
sold by Pason Offshore.

Other

Other is comprised mostly of service rig recorder rentals in Latin America and 
electronic choke actuator rentals.

Discussion of Operations

United States Operations
                     Three Months Ended December
                                             31,   Years Ended December 31,
     
                       2013     2012   Change       2013      2012   Change
    (000s)              ($)      ($)      (%)        ($)       ($)      (%)
    Revenue                                                                
    Electronic                                                      
    Drilling
    Recorder (1)     27,883   24,705       13    108,021   107,160        1
      Pit Volume                                                    
      Totalizer       8,755    7,685       14     33,959    33,459        1
    Communications                                                  
    (1)               3,417      901      279     11,997     4,789      151
      Software        4,548    4,134       10     17,586    16,976        4
      AutoDriller     5,124    5,073        1     20,467    23,222     (12)
      Gas                                                           
      Analyzer/Total
      Gas System      3,461    2,667       30     13,285    11,312       17
      Hazardous Gas                                                 
      Alarm System      534      800     (33)      2,200     3,169     (31)
      Mobilization    2,164    2,299      (6)      8,551     9,233      (7)
    Sales (2)         4,381    2,547       72     11,998     7,790       54
      Other           1,024    1,209     (15)      3,896     5,944     (34)
    Total revenue    61,291   52,020       18    231,960   223,054        4
    Operating costs                                                 
    (2)              22,502   21,084        7     88,697    85,811        3
    Depreciation and                                                
    amortization      7,909    7,713        3     29,366    32,381      (9)
    Segment                                                         
    operating profit 30,880   23,223       33    113,897   104,862        9
    (1)  A portion of the Company's USA communications revenue was
         reclassified to EDR revenue to better reflect the nature of such
         revenue. All comparative figures have been restated accordingly.
         This change had no impact on reported key metrics, EBITDA, cash
         flow from operating activities, or net income (Q4 2012 - $2,153,
         YTD 2012 - $9,344, YTD Q3 2013 - $6,711).
    (2)  Sales and rental services expense for 2012 have been reclassified
         to conform with 2013 presentation.

US segment revenue increased by 18% in the fourth quarter of 2013 over the 
2012 comparable period (11% increase when measured in USD), while revenue from 
the rental of instrumentation equipment increased 16% for the quarter (USD 9%).

For the year ended 2013, US segment revenue increased by 4% (USD 1%) over the 
previous year, and revenue from the rental of instrumentation equipment 
increased by 3% (USD 0%).

As expected, the number of US drilling days decreased approximately 4% in the 
fourth quarter of 2013 versus the fourth quarter of 2012. However, revenue 
from the rental of instrumentation compared favorably to the drop in activity, 
with an increase of 16% (USD 9%) over 2012 levels.

Annual drilling days decreased 9% over 2012 levels while rental revenue 
continued to hold up well against the decline in activity with an increase of 
3% (USD 0%).

Revenue was impacted by the following factors:
        --  More products on each rig, new product adoption, and a
            favorable exchange rate. Revenue increased as a result of a
            change in the pricing model for communications service,
            additional product penetration, primarily with gains in EDR
            peripheral devices (mostly due to Workstations), increased PVT
            market share, customer acceptance of the Company's Live Rig
            View (LRV) real-time data software, and an increase in the
            adoption of the Gas Analyzer. These factors combined resulted
            in an increase in revenue per EDR day in the fourth quarter of
            2013 over 2012 levels of $73 (USD $37). On a year-to-date basis
            revenue per EDR increased by $62 (USD $43 ) over 2012.
        --  An increase in EDR rental days of 3% for the three months ended
            December 31, 2013, over the same time period in 2012, and a
            decrease of 7% for the year ended 2013 over 2012 levels.
        --  A reduction in Hazardous Gas Alarm revenue due to the Company
            removing the H2S sensor from the rig site due to the issues
            surrounding the functionality described above and a reduction
            in product adoption of the AutoDriller.

The factors explained above resulted in the US segment being able to realize 
revenue per EDR day during the fourth quarter of 2013 of $641 (USD $611) 
compared to $568 (USD $574) during the same time period in 2012. For the year 
ended  December 31, 2013, revenue per EDR day increased by $62 (USD $43) to 
$623 (USD $605) over 2012 amounts.

Revenue per industry day for the fourth quarter of the year was $367 (USD 
$350) compared to $305 (USD $308) in 2012. On a year-to-date basis this metric 
increased by $42 (USD $31) to $356 (USD $345).

US market share was 57% during the year ended December 31, 2013, a slight 
increase from the corresponding period in 2012.

The majority of the increase in Sales revenue relates to the increase in sales 
of sensors and systems by 3PS to third parties.

Segment profit, as a percentage of revenue, was 50% for the fourth quarter of 
2013 compared to 45% for the corresponding period in 2012, an increase of $7.6 
million. Year-to-date operating profit increased $9.0 million. The US business 
unit was able to increase its operating margin by leveraging its fixed cost 
structure and controlling variable costs, including repair costs, which are 
down $0.3 million for the quarter and $1.4 million for the full year, as a 
result of the drop in active rig count, which allows the business unit to use 
idle equipment in its fleet to satisfy customer demand, and a drop in average 
repair costs on some products.

The 2013 fourth quarter and full year segment profit percentage was impacted 
by the following factors (all amounts in $CDN):
        --  An increase in communication-related expenses of $0.5 million
            for the fourth quarter and $2.4 million for the full year due
            to the US business unit implementing a more robust level of
            service to its customers. The business unit revised its pricing
            structure to reflect this increased level of performance.
        --  An increase in 3PS sales, with a corresponding increase in
            costs of goods sold, which is included in operating costs.
        --  Most other rental service costs were relatively flat over the
            corresponding period in 2012 when measured in USD. However,
            because of the weakening Canadian dollar, rental service costs,
            when measured in CDN, increased by $0.9 million for the fourth
            quarter and $0.7 million year to date.
        --  Fourth quarter 2013 depreciation and amortization expense was
            relatively flat compared to the fourth quarter of 2012.
            Year-to-date depreciation was down $3.0 million for the
            following reasons:
      o The Company began to accelerate the depreciation on its TGAS system
        in 2012 to recognize the fact that it was being replaced by the Gas
        Analyzer. The TGAS systems are now fully depreciated, resulting in
        a reduction in depreciation expense of $2.4 million.
      o In the first quarter of 2012, the Company began to accelerate the
        depreciation on a portion of its base EDR system, which will become
        obsolete as a result of new product initiatives. Later in 2012, the
        Company re-evaluated this assumption and reduced the amount of
        accelerated depreciation being recorded. This led to a reduction in
        depreciation of $2.7 million.
      o The above reductions were offset by an increase in depreciation on
        the Gas Analyzer system and upgrades to its communication
        infrastructure to accommodate increased functionality. Both of
        these added approximately $2.0 million in depreciation expense.

Canadian Operations
                     Three Months Ended December      Years Ended December 31,
                                             31,
     
                        2013      2012    Change      2013      2012    Change
    (000s)               ($)       ($)       (%)       ($)       ($)       (%)
    Revenue                                                                   
      Electronic                11,864        15    48,943    46,632         5
      Drilling
      Recorder        13,621
      Pit Volume                 4,929         8    19,706    19,921       (1)
      Totalizer        5,343
      Communications   4,034     3,861         4    15,077    15,524       (3)
      Software         2,620     2,385        10     9,631     9,461         2
      AutoDriller      3,475     3,368         3    12,522    13,500       (7)
      Gas                        3,357        17    13,618    12,303        11
      Analyzer/Total
      Gas System       3,913
      Hazardous Gas                609      (44)     1,482     2,443      (39)
      Alarm System       339
      Mobilization       141       178      (21)       496       638      (22)
      Sales          —   —   —   —   —   —
      Other            1,367     1,488       (8)     5,147     5,316       (3)
    Total revenue     34,853    32,039         9   126,622   125,738         1
    Operating costs   10,228     8,858        15    37,116    36,291         2
    Depreciation and             6,246        24    26,088    26,964       (3)
    amortization       7,757
    Segment                     16,935   —    63,418    62,483         1
    operating profit  16,868

Canadian segment revenue grew by 9% for the three months ended December 31, 
2013, compared to the same period in 2012. This positive growth is a result of 
a 5% increase in the number of drilling industry days from 2012 levels, 
combined with more product penetration in a number of different products, and 
an increase in market share to 94% versus 92% in 2012.

On a year-to-date basis, revenue increased by 1%, compared to the year ended 
2012. The number of drilling days was down by 4%, but similar to the fourth 
quarter, revenue increased due to product penetration and growth in market 
share.

EDR rental days increased 8% in the fourth quarter of 2013 over 2012 levels. 
The decrease in EDR rental days for the year ended 2013 was 2%, which was a 
positive result compared to the decrease in industry days of 4%.

Canadian market share was 95% during the year ended December 31, 2013, 
compared to 93% in the corresponding period in 2012.

The Canadian business unit was able to increase its revenue over and above the 
change in industry activity in the fourth quarter mostly through increased 
product adoption, notably EDR peripherals including SideKicks and 
Workstations, and increases in software revenue. In addition, the business 
unit continued to gain market acceptance of the Gas Analyzer. These factors 
combined to lessen the impact of the drop in revenue from the AutoDriller and 
the Hazardous Gas Alarm System as a result of the issues described previously.

The factors above combined to result in:
        --  An increase in revenue per EDR day during the fourth quarter of
            2013 compared to 2012 of $5 to $1,121. For the year ended
            December 31, 2013, revenue per EDR increased by $29 to $1,101.
        --  Fourth quarter revenue per industry day of $1,055 in 2013
            compared to $1,022 in 2012. This metric for the year ended
            December 31, 2013, was $1,041, an increase of 5% over the
            similar period in 2012.

The segment profit for the fourth quarter of 2013 of $16.9 million is a 
decrease of $0.1 million over the 2012 amount. Factors impacting the fourth 
quarter results include:
        --  Fourth quarter activity levels in Canada were modestly stronger
            year-over-year.
        --  Fourth quarter operating expenses include an increase in
            satellite bandwidth costs of $0.8 million as an additional
            segment was added to improve the customer experience at the
            rig. These costs should remain at current levels going forward.
        --  A slight increase of $0.6 million in field-related costs and
            repairs due to the increase in industry activity.
        --  An increase in depreciation and amortization expense due to a
            non-cash write-off of $1.1 million of previously capitalized
            R&D costs as a result of the decision to discontinue funding
            such projects.

The increase in satellite costs and depreciation and amortization expense 
resulted in segment profit, as a percent of revenue, dropping to 48% in the 
fourth quarter of 2013, compared to 53% in the fourth quarter of 2012.

Factors impacting the year-to-date results include weakness in drilling 
activity in the first three quarters of 2013, which led to a decrease in 
industry days of 4,400 (4%) for the 2013 year, with a corresponding decrease 
in EDR rental days of 2,100 or 2%. Other factors impacting the year-to-date 
results include:
        --  An increase in satellite bandwidth costs of $1.6 million.
        --  A slight decrease in field-related costs, including repairs,
            due in most part to the drop in rig activity for the full year.
        --  Decrease in depreciation and amortization expense of $0.8
            million comprised of:
      o A decrease in depreciation due to the TGAS being fully depreciated.
        This, combined with a drop in the acceleration of depreciation on a
        portion of its base EDR systems, led to a decline in expense of
        $2.7 million.
      o A non-cash write-off of $1.0 million of previously capitalized R&D
        costs as a result of the decision to discontinue funding such
        projects, combined with an increase in amortization of R&D costs of
        $1.0 million as a result of the deployment of new software
        applications.

International Operations
                     Three Months Ended December   Years Ended December 31,
                                             31,
     
                       2013    2012       Change     2013     2012   Change
    (000s)              ($)     ($)          (%)      ($)      ($)      (%)
    Revenue                                                                
      Electronic      5,047   4,032           25   18,156   15,159       20
      Drilling
      Recorder
      Pit Volume      1,833   1,486           23    6,924    5,840       19
      Totalizer
      Communications    393     113          248    1,523      537      184
      Software          127     175         (27)      434      513     (15)
      AutoDriller     1,297     969           34    4,456    3,677       21
      Gas             1,211     874           39    4,598    3,689       25
      Analyzer/Total
      Gas System
      Hazardous Gas     345     523         (34)    1,470    1,733     (15)
      Alarm System
      Mobilization      592     621          (5)    2,245    2,394      (6)
      Sales             489     402           22    1,197    1,785     (33)
      Other           1,469     752           95    3,503    2,395       46
    Total revenue    12,803   9,947           29   44,506   37,722       18
    Operating costs   6,715   6,152            9   27,702   23,073       20
    Depreciation and  1,534   2,518         (39)    6,717    8,868     (24)
    amortization
    Segment           4,554   1,277          257   10,087    5,781       74
    operating profit

Revenue in the International operations increased 29% in the fourth quarter of 
2013 compared to the same time period in 2012. Year-to-date revenue increased 
18%.

Operating profit increased by $3.3 million for the fourth quarter of 2013 over 
2012 results. Operating profit for the year ended December 31, 2013, increased 
74% over the similar period in 2012.

A number of factors influenced these results:
        --  In Latin America, increased activity in Argentina and the
            Andean region offset continued market weakness in Brazil and
            Mexico. Revenue was up 14% for the fourth quarter of 2013
            versus the comparative period in 2012. On a year to date basis
            revenue increased 7%.
        --  Australia revenue increased 30% for the fourth quarter of 2013
            and 46% for the full year from 2012 levels as drilling activity
            continues to increase across the region, combined with a slight
            up tick in market share. This revenue increase translated into
            an increase in operating profit of approximately 70% over 2012
            for the three and twelve months ended December 31,2013.
        --  The Company continues to increase its customer base in areas
            the Company has identified as "frontier markets", including the
            Middle East and North Africa (MENA) regions. These new markets,
            combined with increases in market share in the Gulf of Mexico,
            resulted in an increase in year-to-date revenue of 32% over
            2012 levels.
        --  Operating costs increased due to importation-related expenses
            in getting additional equipment into certain markets and
            increases in field-related costs in the markets which saw an
            increase in industry activity.
        --  Depreciation and amortization decreased because intangible
            assets that were being amortized are now fully amortized and
            increased asset utilization has reduced the need for new
            additional equipment.
        --  The Company's Argentinian subsidiary recorded a foreign
            exchange loss in the fourth quarter of 2013 of $0.5 million as
            a result of the devaluation of the Argentinian peso.

Corporate Expenses
                 Three Months Ended December      Years Ended December 31,
                                         31,
     
                    2013      2012    Change      2013      2012    Change
    (000s)           ($)       ($)       (%)       ($)       ($)       (%)
    Other                                                                 
    expenses
    Research and   6,820     7,033       (3)    27,252    22,467        21
    development
    Corporate      4,319     4,326   —    17,373    15,723        10
    services
    Stock-based    6,144     7,237      (15)    32,511    23,792        37
    compensation
    Other                                                                 
      Litigation —    32,500     (100)    61,614    37,913        63
      provision
      Foreign      2,797        10    27,870     2,175     4,573      (52)
      exchange
      loss
      Earn-out   —   —   —     3,071   —   —
      provision
      Impairment —     5,282     (100)   —     7,918     (100)
      loss
      Other          335       475      (29)     1,441       992        45
                  20,415    56,863      (64)   145,437   113,378        28

Consolidated Results

The Company recorded net income of $23.7 million or $0.29 per share for the 
2013 year compared to net income of $39.9 million or $0.49 per share in 2012.

The 2013 results, when compared to the 2012 numbers, were impacted by the 
following corporate related items:
        --  Research and development costs were higher in 2013 versus 2012
            as the Company in 2012 completed the hiring of additional staff
            to support the product development initiatives.
        --  An increase in stock-based compensation expense of 37% due to
            the 34% increase in the value of the stock price during 2013.
        --  An additional provision of $61.6 million booked in 2013
            relating to the litigation, which was settled in August, 2013.
        --  Part of the 2009 purchase of Petron was an earn-out clause that
            was conditional on the successful commercialization of a
            revenue stream generated from a product designed by Petron. In
            the third quarter of 2013, the Company and the previous
            shareholders of Petron agreed to an amount of $3.1 million and
            a provision for this amount was recorded.
        --  In 2012 the Company recorded additional non-cash write-downs
            relating to its investment in the US water treatment business
            and its Torque and Tension sub product.
        --  The effective tax rate for 2013 is significantly higher than
            the 2012 rate due to the following factors:
      o The significant non-deductible, non-cash expense provision for the
        expensing of common share options under the Black-Scholes pricing
        model.
      o The Petron earn-out provision.

Q4 2013 versus Q4 2012

The active rig count in the US decreased by 4% over the fourth quarter of 
2012, and Canadian activity increased by 5%, while both business units saw an 
increase in their market share. The International market saw a modest increase 
in total drilling days, with pockets of significant growth (Offshore, 
Australia, Argentina) combined with continued weakness in other markets 
(Brazil, Mexico).

The Company recorded a net profit of $24.3 million or $0.30 per share in the 
fourth quarter of 2013 compared to a net loss of $13.7 million or $0.17 per 
share in the fourth quarter of 2012. The fourth quarter consolidated results, 
when compared to 2012 figures, were impacted by the following significant 
items:
        --  Stock-based compensation expense decreased compared to the
            fourth quarter of 2012 due to a smaller increase in the
            Company's stock price in the fourth quarter of the current year
            versus 2012.
        --  In the fourth quarter of 2012, the Company recorded an
            additional accrual of $32.5 million for the liability related
            to the patent litigation. This litigation was settled in August
            of 2013.
        --  An increase in the foreign exchange loss of $2.7 million due
            to: 
      o the weakening Canadian dollar versus the US dollar which resulted
        in a loss on the revaluation of the litigation provision into
        Canadian dollars until the payment date in November of 2013.
      o a foreign exchange loss in Argentina as a result of the devaluation
        of the Argentinian peso.
        --  During the fourth quarter of 2012, the Company recorded a
            non-cash impairment loss of $4.7 million against its Torque and
            Tension Sub product, and an additional $0.6 million against the
            US water treatment business.

Q4 2013 versus Q3 2013

The Company's fourth quarter is usually its second strongest quarter. The 
Canadian business unit realized a profit of $16.9 million for the three months 
ended December 31, 2013, compared to a $15.9 million profit in the third 
quarter of 2013. The US business unit realized a profit of $30.9 million for 
the three months ended December 31, 2013, compared to a $30.5 million profit 
in the third quarter of 2013. International operating profit was up $2.0 
million from the prior quarter.

The following items also impacted the comparison to the third quarter 2013 
results:
        --  A decrease in stock-based compensation expense of $9.6 million
            compared to the third quarter of the current year due to an
            increase in the Company's stock price of 19% during the third
            quarter compared to an increase in the stock price of 2% in the
            current quarter.
        --  Increase in depreciation and amortization expense of $1.1
            million due to the Company recording in the fourth quarter a
            non-cash write-off of previously capitalized R&D costs.
        --  An increase in the foreign exchange loss of $2.1 million due to
            the factors described in the section above.
        --  Part of the 2009 purchase of Petron was an earn-out clause that
            was conditional on the successful commercialization of a
            revenue stream generated from a product designed by Petron. In
            the third quarter of 2013, the Company and the previous
            shareholders of Petron agreed to an amount of $3.1 million and
            a provision for this amount was recorded in the third quarter.

Fourth Quarter & Year End Conference Call

Pason will be conducting a conference call for interested analysts, brokers, 
investors and media representatives to review its fourth quarter and full-year 
results at 9:00 a.m. (Calgary time) on Friday, February 28, 2014. The 
conference call dial-in number is 1-888-231-8191 or 1-647-427-7450. You can 
access the seven-day replay by dialing 1-855-859-2056 or 1-416-849-0833, using 
password 19438722.

Pason Systems Inc. is a leading global provider of specialized data management 
systems for drilling rigs. Our solutions, which include data acquisition, 
wellsite reporting, remote communications, and web-based information 
management, enable collaboration between the rig and the office. Pason's 
common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.

Additional information, including the Company's Annual Report and Annual 
Information Form for the year ended December 31, 2013, is available on SEDAR 
at www.sedar.com or on the Company's website at www.pason.com.

Shareholders are also invited to attend the Company's Annual and Special 
Meeting on Wednesday, May 7, 2014, at 3:30 pm at the offices of Pason Systems 
Inc., 6120 Third Street SE, Calgary, Alberta.

Consolidated Balance Sheets
    As at                            December 31, 2013   December 31, 2012
    (CDN 000s) (unaudited)                         ($)                 ($)
    Assets                                                                
    Current                                                               
      Cash and cash equivalents                 78,018             138,253
      Cash held in trust                        11,502              19,691
      Trade and other receivables               87,469              84,506
      Prepaid expenses                           3,121               2,920
      Income taxes recoverable                  15,752             —
      Total current assets                     195,862             245,370
    Non-current                                                            
      Property, plant and                      183,601             174,651
      equipment
      Intangible assets                         65,261              59,593
      Deferred tax assets                        1,152               8,764
      Total non-current assets                 250,014             243,008
    Total assets                               445,876             488,378
    Liabilities and equity                                                 
    Current                                                                
      Trade payables and accruals               30,485              25,674
      Litigation provision                     —              19,533
      Income taxes payable                     —               3,313
      Stock-based compensation                  25,942              13,788
      liability
      Dividend payable                          11,502              19,691
      Total current liabilities                 67,929              81,999
    Non-current                                                            
      Stock-based compensation                   3,905               2,583
      liability
      Deferred tax liabilities                   7,573               2,600
      Litigation provision                     —              32,500
      Total non-current                         11,478              37,683
      liabilities
    Equity                                                                
      Share capital                             80,725              79,393
      Share-based benefits reserve              12,927              12,927
      Foreign currency translation               7,958             (8,348)
      reserve
      Retained earnings                        264,859             284,724
      Total equity                             366,469             368,696
    Total liabilities and equity               445,876             488,378

Change in accounting classification

In 2013, the Company changed how it discloses cash held in trust. Previously, 
this amount was included in "Cash and cash equivalents" on the Consolidated 
Balance Sheets. Effective for 2013, cash held in trust, representing cash held 
for the payment of the dividend, is separately identified as a current asset. 
The 2012 comparative financial statements have been adjusted to reflect this 
change in the accounting policy. The change results in the consolidated 
financial statements providing reliable and more relevant information.

Consolidated Statements of Operations
                                 Three Months Ended             Years Ended
                                       December 31,            December 31,
     
                                    2013       2012      2013      2012
    (CDN 000s, except per            ($)        ($)       ($)       ($)
    share data) (unaudited)
    Revenue                                                            
      Equipment rentals and      108,947     94,006   403,088   386,514
      sales
    Operating expenses                                                 
      Rental services             34,209     31,663   134,874   125,269
      Local administration         5,236      4,431    18,641    19,906
      Depreciation and            17,200     16,477    62,171    68,213
      amortization
                                  56,645     52,571   215,686   213,388
                                                                       
    Operating profit              52,302     41,435   187,402   173,126
    Other expenses                                                     
      Research and development     6,820      7,033    27,252    22,467
      Corporate services           4,319      4,326    17,373    15,723
      Stock-based compensation     6,144      7,237    32,511    23,792
      Other expenses               3,132     38,267    68,301    51,396
                                  20,415     56,863   145,437   113,378
                                                                       
    Income (loss) before          31,887   (15,428)    41,965    59,748
    income taxes
      Income taxes (recovery)      7,599    (1,725)    18,310    19,864
    Net income (loss)             24,288   (13,703)    23,655    39,884
    Income (loss) per share                                            
      Basic                         0.30     (0.17)      0.29      0.49
      Diluted                       0.29     (0.16)      0.29      0.48

Consolidated Statements of Other Comprehensive Income
                                   Three Months Ended           Years Ended
                                         December 31,          December 31,
     
                                     2013        2012       2013      2012
    (CDN 000s) (unaudited)            ($)         ($)        ($)       ($)
    Net income (loss)              24,288    (13,703)     23,655    39,884
    Items that may be reclassified                              
    subsequently to net income:
      Foreign currency translation  9,421       2,681     16,306   (2,513)
      adjustment
    Total comprehensive income     33,709    (11,022)     39,961    37,371
    (loss)

Consolidated Statements of Changes in Equity
                                                  Foreign
                                Share-Based      Currency
                        Share      Benefits   Translation   Retained      Total
                      Capital       Reserve       Reserve   Earnings     Equity
    (CDN 000s)                                        ($)
    (unaudited)           ($)           ($)                      ($)        ($)
    Balance at                       12,927                  282,564    367,269
    January 1, 2012    77,613                     (5,835)
      Net income      —       —       —     53,587     53,587
      Dividends       —       —       —   (18,033)   (18,033)
      Other                         —                  —    (5,194)
      comprehensive
      loss            —                     (5,194)
      Exercise of                   —                  —      1,222
      stock options     1,222                     —
    Balance at                       12,927                  318,118    398,851
    September 30,
    2012               78,835                    (11,029)
      Net loss        —       —       —   (13,703)   (13,703)
      Dividends       —       —       —   (19,691)   (19,691)
      Other                         —                  —      2,681
      comprehensive
      loss            —                       2,681
      Exercise of                   —                  —        558
      stock options       558                     —
    Balance at                       12,927                  284,724    368,696
    December 31,
    2012               79,393                     (8,348)
      Net loss        —       —       —      (633)      (633)
      Dividends       —       —       —   (32,018)   (32,018)
      Other                         —                  —      6,885
      comprehensive
      income          —                       6,885
      Exercise of                   —                  —      1,020
      stock options     1,020                     —
    Balance at                       12,927                  252,073    343,950
    September 30,
    2013               80,413                     (1,463)
      Net income      —       —       —     24,288     24,288
      Dividends       —       —       —   (11,502)   (11,502)
      Other                         —                  —      9,421
      comprehensive
      income          —                       9,421
      Exercise of                   —                  —        312
      stock options       312                     —
    Balance at                       12,927                  264,859    366,469
    December 31,
    2013               80,725                       7,958

Consolidated Statements of Cash Flows
                                   Three Months Ended           Years Ended
                                         December 31,          December 31,
     
                                      2013       2012       2013       2012
    (CDN 000s, except per share        ($)        ($)        ($)        ($)
    data) (unaudited)
    Cash from operating                                                    
    activities
      Net income (loss)             24,288   (13,703)     23,655     39,884
    Adjustment for non-cash                                                
    items:
      Depreciation and              17,200     16,477     62,171     68,213
      amortization
      Litigation provision         —     32,500    —     32,500
      Impairment loss              —      5,282    —      7,918
      Stock-based compensation       3,668      5,541     20,656     16,067
      Deferred income taxes        (2,358)    (8,223)     12,899    (6,019)
      Unrealized foreign             2,183      (926)      3,694        385
      exchange loss (gain)
    Funds flow from operations      44,981     36,948    123,075    158,948
    Movements in non-cash                              
    working capital items:
      Decrease (increase) in         2,712      7,391      (999)     16,376
      trade and other
      receivables
      Decrease (increase) in           463      1,853      (125)      (994)
      prepaid expenses
      Increase (decrease) in         6,243      3,513    (8,019)     18,072
      income taxes
      Decrease in litigation     (115,785)    —   (52,033)    —
      provision
      (Decrease) increase in       (9,101)   (10,746)      5,376    (7,101)
      trade payables and
      accruals
      (Decrease) increase in       (6,179)    (3,564)      2,973      2,312
      stock-based compensation
      liability
      Effects of exchange rate       2,231      2,808      3,100      1,778
      changes
    Cash (used in) generated      (74,435)     38,203     73,348    189,391
    from operating activities
      Income tax paid                (785)    (3,988)   (11,301)   (20,213)
    Net cash (used in) from       (75,220)     34,215     62,047    169,178
    operating activities
    Cash flows from (used in)                                              
    financing activities
      Proceeds from issuance of        312        558      1,332      1,780
      common shares
      Purchase of stock options    (3,643)    (3,532)   (10,153)    (8,772)
      Payment of dividends        (10,677)    —   (51,709)   (34,413)
    Net cash used in financing    (14,008)    (2,974)   (60,530)   (41,405)
    activities
    Cash flows (used in) from                          
    investing activities
      Additions to property,      (17,265)   (10,587)   (56,171)   (60,284)
      plant and equipment
      Deferred development costs   (2,862)    (3,429)   (14,493)   (11,140)
      Proceeds on disposal of          257        586        582        586
      property, plant and
      equipment
      Changes in non-cash            (482)       (35)      (989)    (2,646)
      working capital
    Net cash used in investing    (20,352)   (13,465)   (71,071)   (73,484)
    activities
    Effect of exchange rate on         951        356      1,130    (1,338)
    cash and cash equivalents
    Net (decrease) increase in   (108,629)     18,132   (68,424)     52,951
    cash and cash equivalents
    Cash and cash equivalents,     198,149    139,812    157,944    104,993
    beginning of period
    Cash and cash equivalents,      89,520    157,944     89,520    157,944
    end of period
                                                                           
    Cash and cash equivalents                                              
    consists of:
    Cash and cash equivalents       78,018    138,253     78,018    138,253
    Cash held in trust              11,502     19,691     11,502     19,691
    Cash and cash equivalents,      89,520    157,944     89,520    157,944
    end of period

Operating Segments

The Company operates in three geographic segments: Canada, the United States, 
and International (Latin America, Offshore, the Eastern Hemisphere, and the 
Middle East). The amounts related to each segment are as follows:
    Three Months Ended    Canada   United States   International      Total
    December 31, 2013
    (unaudited)              ($)             ($)             ($)        ($)
    Revenue               34,853          61,291          12,803    108,947
    Operating costs       10,228          22,502           6,715     39,445
    Depreciation and       7,757           7,909           1,534     17,200
    amortization
    Segment operating     16,868          30,880           4,554     52,302
    profit
    Research and                                                      6,820
    development
    Corporate services                                                4,319
    Stock-based                                                       6,144
    compensation
    Other expenses                                                    3,132
    Income taxes                                                      7,599
    Net income                                                       24,288
    Capital expenditures  10,118           7,885           2,124     20,127
    Goodwill             —          19,685           2,600     22,285
    Intangible assets     32,343           7,773           2,860     42,976
    Segment assets       173,947         210,764          61,165    445,876
    Segment liabilities   46,495          23,621           9,291     79,407
                                                                           
    Three Months Ended                                                     
    December 31, 2012
                                                                           
    Revenue               32,039          52,020           9,947     94,006
    Operating costs        8,858          21,084           6,152     36,094
    Depreciation and       6,246           7,713           2,518     16,477
    amortization
    Segment operating     16,935          23,223           1,277     41,435
    profit
    Research and                                                      7,033
    development
    Corporate services                                                4,326
    Stock-based                                                       7,237
    compensation
    Other expenses                                                   38,267
    Income taxes                                                    (1,725)
    Net loss                                                       (13,703)
    Capital expenditures   5,407           5,939           2,670     14,016
    Goodwill             —          18,414           2,600     21,014
    Intangible assets     25,583           9,711           3,285     38,579
    Segment assets       182,458         241,391          64,529    488,378
    Segment liabilities   96,780          13,120           9,782    119,682
                                                                  
    Year Ended December   Canada   United States   International      Total
    31, 2013
                             ($)             ($)             ($)        ($)
    Revenue              126,622         231,960          44,506    403,088
    Operating costs       37,116          88,697          27,702    153,515
    Depreciation and      26,088          29,366           6,717     62,171
    amortization
    Segment operating     63,418         113,897          10,087    187,402
    profit
    Research and                                                     27,252
    development
    Corporate services                                               17,373
    Stock-based                                                      32,511
    compensation
    Other expenses                                                   68,301
    Income taxes                                                     18,310
    Net income                                                       23,655
    Capital expenditures  37,709          26,101           6,854     70,664
    Goodwill             —          19,685           2,600     22,285
    Intangible assets     32,343           7,773           2,860     42,976
    Segment assets       173,947         210,764          61,165    445,876
    Segment liabilities   46,495          23,621           9,291     79,407
                                                                           
    Year Ended December                                                    
    31, 2012
                                                                           
    Revenue              125,738         223,054          37,722    386,514
    Operating costs       36,291          85,811          23,073    145,175
    Depreciation and      26,964          32,381           8,868     68,213
    amortization
    Segment operating     62,483         104,862           5,781    173,126
    profit
    Research and                                                     22,467
    development
    Corporate services                                               15,723
    Stock-based                                                      23,792
    compensation
    Other expenses                                                   51,396
    Income taxes                                                     19,864
    Net income                                                       39,884
    Capital expenditures  25,682          37,850           7,892     71,424
    Goodwill             —          18,414           2,600     21,014
    Intangible assets     25,583           9,711           3,285     38,579
    Segment assets       182,458         241,391          64,529    488,378
    Segment liabilities   96,780          13,120           9,782    119,682

Other Expenses
                          Three Months Ended         Years Ended
                                December 31,        December 31,
                             2013       2012      2013      2012
                              ($)        ($)       ($)       ($)
    Litigation provision  —     32,500    61,614    37,913
    Foreign exchange loss   2,797         10     2,175     4,573
    Earn-out provision    —    —     3,071   —
    Impairment loss       —      5,282   —     7,918
    Other                     335        475     1,441       992
    Other expenses          3,132     38,267    68,301    51,396

During the quarter ended December 31, 2012, the Company accrued an additional 
$32.5 million provision for the patent litigation, which was settled in 
August, 2013.

During the fourth quarter of 2012, the Company recorded a non-cash impairment 
loss of $4.7 million against its Torque and Tension Sub product, and an 
additional $0.6 million against the US water treatment business.

Pason Systems Inc.

Pason Systems Inc. is a leading global provider of specialized data management 
systems for drilling rigs. Our solutions, which include data acquisition, 
wellsite reporting, remote communications, and web-based information 
management, enable collaboration between the rig and the office. Pason's 
common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.

Certain information regarding the Company contained herein may constitute 
forward-looking information under applicable securities law. The words 
"anticipate", "expect", "believe", "may", "should", "will", "estimate", 
"project", "outlook", "forecast" or other similar words are used to identify 
such forward-looking information and statements. Forward-looking statements in 
this document may include statements, express or implied regarding the 
anticipated business prospects and financial performance of Pason; 
expectations or projections about future strategies and goals for growth and 
expansion; expected and future cash flows and revenues; and expected impact of 
future commitments. These forward-looking statements are based upon various 
underlying factors and assumptions, including the state of the economy and the 
oil and gas exploration and production business, in particular; the Company's 
business prospects and opportunities; and estimates of the financial and 
operational performance of Pason.

Forward-looking information and statements are subject to known or unknown 
risks and uncertainties that may cause actual results to differ materially 
from those anticipated or implied in the forward-looking information and 
statements. Risk factors that could cause actual results or events to differ 
materially from current expectations include, among others, the ability of 
Pason to successfully implement its strategic initiatives and whether such 
strategic initiatives will yield the expected benefits, the operating 
performance of Pason's assets and businesses, the price of energy commodities, 
competitive factors in the energy industry, changes in laws and regulations 
affecting Pason's businesses, technological developments, and general economic 
conditions.

Readers are cautioned not to place undue reliance on forward-looking 
statements as there can be no assurance that the plans, intentions or 
expectations upon which they are placed will occur. Such forward looking 
statements, although considered reasonable by management as of the date 
hereof, may prove to be incorrect and actual results may differ materially 
from those anticipated. Forward-looking statements contained in this press 
release are expressly qualified by this cautionary statement.

Additional information on risks and uncertainties and other factors that could 
affect Pason's operations or financial results are included in Pason's reports 
on file with the Canadian securities regulatory authorities and may be 
accessed through the SEDAR website (www.sedar.com) or through Pason's website 
(www.pason.com). Furthermore, any forward looking statements contained in this 
news release are made as of the date of this news release, and Pason does not 
undertake any obligation to update publicly or to revise any of the included 
forward-looking statements, whether as a result of new information, future 
events or otherwise, except as expressly required by securities law.



SOURCE  Pason Systems Inc. 
For more information about Pason Systems Inc., visit the company's  website 
atwww.pason.com or contact: 
Marcel Kessler President and CEO 403-301-3400 marcel.kessler@pason.com 
Jon Faber(1) Chief Financial Officer 403-301-3400 jon.faber@pason.com 
David Elliott(1) Vice President, Finance 403-301-3400 david.elliott@pason.com 
(1) Jon Faber has been appointed to the role of Chief Financial Officer  
effective March 1, 2014. David Elliott retains the role of Vice  President, 
Finance. 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/February2014/27/c7503.html 
CO: Pason Systems Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Feb/27/2014 23:45 GMT
 
 
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